1. Compute the company's contribution margin under all three scenarios (Current, Alternative 1 Bakery, and Alternative 2 Drive-thru). Compute the contribution margin both in total dollars and dollar per unit.

2. Compute the company's contribution margin ratio under all three scenarios. (Note: DO NOT round the CMR for accurate calculations in the following questions) You may find it easier to use formulas in excel as it will use the entire figure in the formula calculation.

3. Compute the break-even point both in units and in sales dollars under all three scenarios.

4. If the company wishes to generate target income of $175,000 (which after-tax would be $122,500), what is the amount of sales that needs to be generated? How many sales units will then need to be served? Prepare a contribution margin (CVP) Income Statement for this step and verify that your after-tax net income in fact equals $122,500 for all three scenarios.

Classic Coffee Company Husband and wife, John and Mae West, decided to start their own business which would bring great coffee from all over the world to their local community. Together they have formed Classic Coffee Company, or CCC. John is selecting and making the coffee they serve. Mae manages the front and back office; selling coffee to customers, paying employees, and running ads for the coffee shop. Last year, the company sold 48,800 units and had the below sales and cost figures. Sales Variable Costs Contribution Margin Fixed Costs Income Before Taxes Income Tax Net Income $ 134 200.00 $ 29 280.00 $ 104,920.00 $ 52.000.00 $ 52.920.00 $ 15,876.00 $ 37,044.00 The husband and wife team have been in business for 2 years. With competition rising in the coffee industry, they know that another challenging and competitive year lies ahead of them. They are considering two alternatives and have hired your consulting group, known for its inventive business and accounting consulting work, to help them make some important business decisions. Alternative 1- Bakery Facing stiff competition from other coffee and beverage shops, Classic Coffee Company (CCC) is considering expanding its products to include bakery items. CCC would now experience higher average sales amounts per customer since beverage sales may be accompanied with food sales. This would, however, increase the company's variable costs since it would need to purchase the food items from outside vendors. The following data pertains to adding the bakery option: Total sales in the number of units would increase 25% with the added bakery option. The average sales price per unit would increase from the current $2.75 to $4.00 when food sales are added to the coffee shop. The variable cost per unit would increase to $1.50 per unit to account for the added cost of bakery items. There would be an increase in fixed costs of $30,000 for advertising to inform the public of this change. Alternative 2 - Drive Thru CCC is thinking about having a drive-thru installed. Having this amenity would help the coffee shop increase its customer base, allowing them to reach a greater number of customers. This added convenience would permit CCC to slightly increase the price of its average coffee and would not increase the per unit variable costs for the company. The following data pertains to adding This alternative is exclusive of alternative 1 Total sales in the number of units would double what it was last year. The construction of the drive-thru would increase fixed costs by $150,000 - which represents one- time construction and installation costs. This alternative would allow CCC to increase their average sales price to $3.30 a cup of coffee and their variable cost per unit would remain the same